"We lost everything we had," game designer Travis Baldree says. When describing the August 2008 collapse of his last studio, Flagship North, he's polite and open, and speaks in the matter-of-fact way someone might talk about a long-deceased grandparent.

Of course, he's used to answering this question. The Seattle game studio's collapse was brutal. Its years-in-the-making, massively-multiplayer game Mythos was on pace to redefine the open-world fantasy genre, and its makers were legendary among gaming fans, credited with fantasy hits like Diablo and Fate . But as the game neared the finish line, the parent company dissolved.

Flagship was a two-studio company, and its San Francisco office tanked the company with a buggy, low-selling dud of an online fantasy game, Hellgate London . As a way to save face amidst what Baldree calls a "minefield" of partners, the Seattle team had to suffer: Every last bit of Mythos was sold off, from the design code to the tiniest pieces of art.

"We didn't get to take anything along with us," Baldree says. Here, he pauses, then corrects himself: "Well, we came away with an excellent set of experiences, knowing immediately what we wanted to do."

[caption id="" align="alignnone" width="550" caption="Explosive attack in the game Torchlight"] [/caption]

Baldree and his dozen-plus team say they started their new company, Runic Games , "within an hour" of Flagship's closure. Their first game, Torchlight, has been on sale for a week and has already been a sleeper success, winning over PC gaming diehards by combining the best bits of the staff's old portfolio—namely, Diablo and Fate —into a slick, compact, $20 package of magic-loaded dungeon crawling.

"There's nothing like losing all of your work to make you do something that you know you can finish," Baldree quips, explaining that Torchlight is a "torn page" from the earlier project. Makes sense; Torchlight isn't the big, online beast that Mythos had been touted as, but this new title makes no such claims and thus succeeds by scale.

Not that it's dinky. Like Diablo before it, this game sends you down an endless dungeon to fight zillions of critters. Battle, find treasure, get stronger, descend to tougher realms; repeat. At the outset, I shrugged—"uh, played this kinda game before." Then the intangible bits conspired against me. The gorgeous, consistent art direction, the smart tweaks to the tried-and-true formula, the the way the game makes every action feel powerful and epic ... I've lost a few good nights of sleep for the past week or so, as has every pal I've recommended the game to. (I'm finishing this review at 5am for a reason.)

Hardcore as this sounds, Torchlight has the mainstream in mind, and Runic points to staff members who have worked at "casual game" companies like Redmond's WildTangent. With Twitter word-of-mouth, a low price, and placement on casual gaming portals (not to mention Wal-Mart store shelves this January), Baldree and co. believe they can push their game as the Bejeweled of D&D-style gaming.

Oh, and about that big, online game they never finished? Runic expects to release one of their own "within two years." In the meantime, Torchlight is the company's amuse bouche —a quick turnaround for a design team that might've otherwise been derailed by money issues, and an immediate delight for gamers who doubted that Runic's woe-filled track record could finally result in a fun video game.

Someone still owns the rights to those old Mythos assets, and another company may eventually release that game without Runic's blessing. The Seattle team laughs off the hypothetical, but if it were to happen, they'd call it a yardstick for how far they've come in 15 months: "We'd like that if anyone went back to Mythos, after what we've been doing, it'd be disappointing," Baldree says. "We hope that we shot [Mythos] in the head."